Next Generation Supply Management Defined

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Daily Archives: November 19, 2012

As highlighted in this recent post on Supply Chain Digital, the product life cycle is in decline now that 50% of annual company revenues across a range of industries are derived from new products launched within the past three years at the same time that there are 250 supply chain disruptions to public company supply chains every month (Source) that result in shareholder value dropping by 10.28% on average (Source) and that takes the company an average of 50 trading days to recover from.

They’re too fast. There are too many products being introduced too fast. For example, how often do you need a new phone anyway? It’s a damn phone. And a dress shirt is a dress shirt. Now, it’s true that you need to constantly improve computing technology (to keep up with the bloatware), but do you need to change the form factor every year? Sure you need to increase the memory, the processing power, and the storage, but there’s no reason the form factors can’t stay the same — especially since density keeps increasing.

They’re too slow. The average company can’t respond to supply chain disruptions or market shifts fast enough to prevent significant stock-outs, significant drops in revenue, or reputational damages that take it, on average, two months to recover from.

Companies need to balance the competing agendas of innovation, renovation, and reverberation. While constant product innovation is needed, the innovation needs to enhance the product lines and not destroy them. Since research is expensive, the gains from each effort need to be maximized. That means reusing designs, components, and innovations to the extent possible for more than just a year or two.

Furthermore, some things just can’t be reinvented. A toaster is a toaster is a toaster. A new design every year isn’t going to drastically increase revenues and is, to be blunt, a waste of time.

Unnecessary efforts need to be eliminated and redirect to risk management. There’s not enough focus on risk or the mitigation thereof. For example, the benefits of an innovation efforts can be eliminated by the failure of a strategic supplier and the expected profits from a new a product launch can disappear if a supply disruption translates into stock-outs across the board in peak seasons.